Greg Hinz On Politics

Durbin, think tank attack GOP proposal to drop state, local deduction

Illinois' senior U.S. senator and a progressive-leaning Chicago think tank took dead aim today at the arguably weakest​ and most controversial portion of the national GOP's tax-reform plan, saying that eliminating the deduction for state and local taxes would clobber local taxpayers.

Sen. Dick Durbin and Center for Tax & Budget Accountability chief Ralph Martire said at a news conference that roughly one-third of Illinois residents take the deduction, including 800,000 in Cook County alone—the latter more than in eight states combined.

Eliminating the tax break, as the GOP plan proposes, would raise average taxable income by $13,000 per taxpayer, Martire said, transferring $1.3 trillion over the next decade to other taxpayers, predominantly the wealthy.

"When you tell people we're going to tax a tax, I think they get it," said Durbin, arguing that local taxpayer money that already has gone to pay local sales, property and other taxes should not be hit again by Uncle Sam.

In fact, he said, the average family of four earning $50,000 a year in Illinois would pay $887 more per year than under current law, with half of the benefits over an overall tax cut going to the top 1 percent of earners.

Some Republicans have argued that cutting taxes will stimulate the economy everywhere and that residents of low-tax states effectively "subsidize" areas such as California, New York and Illinois that have fairly high local tax rates.

But even though the high-tax states are predominantly Democratic, they collectively have dozens of GOP congressmen, and talk has risen in recent days that Republicans are prepared to amend their plan, perhaps by limiting the deduction to those with income below a certain level, or perhaps by requiring taxpayers to choose between the local-tax deduction and the current break on home mortgage interest. Doing so, however, could drive up the federal deficit even higher.

Democrats seem inclined not to wait but to try to drive in the stake now.

"This is a 'Hail Mary' pass by Republicans after they failed to pass health care reform," said Durbin, the Senate's second-ranking Democrat. But even among Republicans who are concerned that the plan will force up the deficit, "I think they're going to find that support for this is going to erode."

Durbin conceded that some businesses, particularly smaller firms, would gain from the proposal if it becomes law by the end of the year, as GOP leaders hope. But it won't do much for many large businesses, a good share of which already have no federal income tax liability at all, he said.

I've asked U.S. Rep. Peter Roskam, R-Wheaton, a central figure in tax maneuvering as chairman of the House tax policy subcommittee, if he'd care to respond. I'll add in later any response his office gives.